Schmidt v. HSC, Inc.

NOT FOR PUBLICATION IN WEST'S HAWAIʻI REPORTS AND PACIFIC REPORTER

Electronically Filed
Intermediate Court of Appeals
CAAP-XX-XXXXXXX
25-SEP-2024
08:22 AM
Dkt. 89 SO

NO. CAAP-XX-XXXXXXX

IN THE INTERMEDIATE COURT OF APPEALS

OF THE STATE OF HAWAIʻI

THOMAS FRANK SCHMIDT and LORINNA JHINCIL SCHMIDT,
Plaintiffs-Appellants, v.
HSC, INC., a Hawaii corporation; RICHARD HENDERSON, SR.;
ELEANOR R.J. HENDERSON, Defendants-Appellees,
and JOHN DOES 1-10; JANE DOES 1-10;
DOE CORPORATIONS 1-10; and DOE UNINCORPORATED ASSOCIATIONS,
INCLUDING PARTNERSHIPS 1-10, Defendants.

APPEAL FROM THE CIRCUIT COURT OF THE THIRD CIRCUIT
(CIVIL NO. 3CC061000228)

SUMMARY DISPOSITION ORDER
(By: Hiraoka, Presiding Judge, Wadsworth and McCullen, JJ.)

Plaintiff-Appellants Thomas Frank Schmidt and Lorinna

Jhincil Schmidt (Schmidts) appeal from the Circuit Court of the

Third Circuit's 1 (1) November 12, 2020 Findings of Fact,

Conclusions of Law, and Order Granting Defendants' Motion for

Summary Judgment (Order Granting Summary Judgment), and

1 The Honorable Henry T. Nakamoto presided.
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(2) November 12, 2020 order denying the Schmidts' motion to

amend and correct the Order Granting Summary Judgment "to

Conform to the [Hawai‘i] Supreme Court Decision Dated November 8,

2019, Filed in this Court on December 4, 2019 as Document

No. 169, and the December 3, 2019 [Hawaiʻi] Supreme Court

Judgment on Appeal, as Document No. 171, Filed February 14, 2020

[Dkt 173]" (Order Denying Motion to Amend).

On appeal, the Schmidts contend the circuit court

erred in concluding they were unable to pursue a claim under

Hawai‘i Revised Statutes (HRS) Chapter 651C, also known as the

Hawai‘i Uniform Fraudulent Transfers Act (HUFTA), once their

judgment against original debtor Realty Finance, Inc. (RFI)

expired.

Upon careful review of the record and the briefs

submitted by the parties and having given due consideration to

the issues raised and the arguments advanced, we resolve the

points of error as discussed below, and affirm.

The background underlying this case spans over 20

years and includes three appeals. Briefly, RFI was a wholly

owned subsidiary of HSC, Inc. Richard and Eleanor Henderson

(Hendersons) were officers and directors of HSC. Richard and

family members owned 70 percent of HSC.

RFI obtained a foreclosure judgment against the

Schmidts. In 2000, after receiving the foreclosure sale

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proceeds, RFI transferred funds to the Hendersons, and

transferred funds to a law firm to satisfy an HSC debt.

Following the transfers, RFI became insolvent.

In 2004, judgment was entered in favor of the Schmidts

and against RFI for "$537,258.66, constituting the surplus of

the foreclosure sale proceeds" (2004 Judgment). In 2006, the

Schmidts filed a first amended complaint (2006 Complaint)

against HSC and the Hendersons claiming "RFI removed or

concealed assets and thereby became insolvent shortly after the

transfers were made and shortly after RFI received the mortgage

sale proceeds from" the Schmidts. In the 2006 Complaint, the

Schmidts relied on the 2004 Judgment to establish they were

creditors of RFI.

Multiple appeals occurred. In the third appeal, the

Hawai‘i Supreme Court determined the Schmidts timely raised their

HUFTA claims, and remanded the case to the circuit court.

Schmidt v. HSC, Inc., 145 Hawaiʻi 351, 362, 452 P.3d 348, 359

(2019). On remand, the circuit court issued its Order Granting

Summary Judgment, ruling the Schmidts were barred from pursuing

their HUFTA claim because "[t]he 2004 Judgment was the only

basis on which the Schmidts claimed to be creditors of RFI" and

the Schmidts "are no longer 'creditors' of RFI as their 2004

Judgment was not extended, and therefore, expired as a matter of

law under HRS § 657-5."

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Here, before this court, the Schmidts raise seven

points of error, 2 which we consolidate for discussion as

2 The Schmidts' seven points of error are as follows:

1. "The trial court committed reversible error granting HSC and
Henderson's 12 June 2020 motion for summary judgment that
Schmidts' UFTA claim was no longer valid as their judgment
against the transferor RFI expired, thereby terminating their
UFTA claim";

2. "The trial court committed reversible error refusing to follow
[Hawaiʻi] Supreme Court decision in Schmidt v. HSC, Inc., 145 Haw.
351, 452 P.3d 348 (2019) (Schmidt III) in which the case was
remanded for the second time, holding that the Schmidts' UFTA
claim was not barred by the one[-]year statute of limitations";

3. "The trial court committed reversible error denying Schmidts'
14 February 2020 motion to amend and correct the 19 October 2016
FOF, COL, order and judgment to conform with the [Hawaiʻi] Supreme
Court decision in Schmidt III";

4. "The trial court committed reversible error in FOF No. 3 on 12
November 2020 in 20 ROA 22 at pages 2-3";

5. "The trial court committed reversible error in COL Nos. 1, 2-4
and 5 when it filed the FOF, COL and order granting Defendants'
motion for summary judgment on 12 November 2020";

6. "The trial court committed reversible error in filing the
12 November 2020 order granting the Defendants HSC and
Henderson's motion for summary judgment which appears in 20 ROA
222 @ page 4 and which appears also in Appendix 1 incorporated
herein by reference as if fully set forth herein"; and

7. "The trial court committed reversible error filing the Final
Judgment on 5 March 2021, a copy of which is appended in Appendix
11."

(Some emphasis omitted.) The Schmidts do not raise specific arguments
regarding their challenge to findings of fact (FOF) 3 and conclusions of law
(COL) 1-5. Nonetheless, based on our decision below, FOF 3 was not clearly
erroneous and COL 1-5 were not wrong.

In the argument section of their opening brief, the Schmidts discuss
due process and equal protection violations. The Schmidts, however, do not
raise these issues in their points of error or cite to where in the record
they raised these issues before the circuit court. Hawaiʻi Rules of Appellate
Procedure (HRAP) Rule 28(b)(4). Thus, we deem these issues waived. HRAP
Rule 28(b)(4); Onaka v. Onaka, 112 Hawai‘i 374, 387, 146 P.3d 89, 102 (2006)
(explaining "[w]e have repeatedly warned that an appellate court will not
sift through a voluminous record" where appellant fails to provide citations
to the record).

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asserting (1) the circuit court erred in determining their HUFTA

claim was no longer valid, and (2) the law of the case doctrine

rendered the Order Granting Summary Judgment moot.

(1) The Schmidts contend the circuit court erred in

determining their HUFTA claim was not viable because a judgment

is not required to pursue a HUFTA claim. Although a judgment is

not required to pursue a HUFTA claim, under HRS § 651C-7 (2016),

being a creditor is.

HUFTA's relief provision, HRS § 651C-7, allows a

creditor to seek relief from transfers of funds to satisfy a

claim:

(a) In any action for relief against a transfer or
obligation under this chapter, a creditor, subject to the
limitations provided in section 651C-8, may obtain:

(1) Avoidance of the transfer or obligation to the
extent necessary to satisfy the creditor's claim;

. . . .

(b) If a creditor has obtained a judgment on a claim
against the debtor, the creditor may, if the court so
orders, levy execution on the asset transferred or its
proceeds.

(Emphases added and formatting altered.) A creditor is defined

as "a person who has a claim against a debtor." HRS § 651C-1

(2016).

Again, the Schmidts relied on the 2004 Judgment in

their 2006 Complaint to establish they were creditors of RFI,

i.e., had a claim against RFI. The Schmidts, however, did not

seek to extend the 2004 Judgment and, thus, the 2004 Judgment

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expired in 2014. HRS § 657-5 (2016). 3 An expired judgment is

presumed "paid and discharged." Id.; Realty Fin., Inc. v.

Schmidt, 104 Hawai‘i 191, 86 P.3d 1000, No. 23441, 2004 WL

541878, at *6, (Haw. Mar. 18, 2004) (mem. op.) (citing

Restatement (Second) Judgments § 18 cmt. a (2003)) (noting

"[w]hen the plaintiff recovers a valid and final personal

judgment, his original claim is extinguished and rights upon the

judgment are substituted for it").

In 2016, the circuit court entered an order deeming

the 2004 Judgment discharged. In its order, the circuit court

stated the 2004 Judgment "was entered more than ten years ago,

and no extension of the 2004 Judgment was sought by [the

Schmidts]. Under HRS § 657-5, the 2004 Judgment, with all the

rights and remedies appurtenant thereto, is conclusively deemed

3 HRS § 657-5 provides a judgment is presumed paid and discharged after
10 years unless an extension of the judgment was granted:

Domestic judgments and decrees. Unless an extension is
granted, every judgment and decree of any court of the
State shall be presumed to be paid and discharged at the
expiration of ten years after the judgment or decree was
rendered. No action shall be commenced after the
expiration of ten years from the date a judgment or decree
was rendered or extended. No extension of a judgment or
decree shall be granted unless the extension is sought
within ten years of the date of the original judgment or
decree was rendered. A court shall not extend any judgment
of decree beyond twenty years from the date of the original
judgment or decree. No extension shall be granted without
notice and the filing of a non-hearing motion or a hearing
motion to extend the life of the judgment or decree.

(Emphasis added.)

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paid and discharged" citing Int'l Sav. & Loan Ass'n v. Wiig, 82

Hawai‘i 197, 199, 921 P.2d 117, 119 (1996).

Once the 2004 Judgment was considered discharged, the

Schmidts lost their status as creditors of RFI. And the

Schmidts did not show there was another basis for being

creditors of RFI. Because the Schmidts were no longer creditors

of RFI, they could not sustain their HUFTA claim in the 2006

Complaint.

Thus, the circuit court did not err in granting

summary judgment.

(2) Next, the Schmidts contend the circuit court

erred in determining their HUFTA claim was not viable because

the law of the case rendered the "very tardy motion for summary

judgment under [Hawai‘i Rules of Civil Procedure] Rule 56 moot."

Contrary to the Schmidts' argument, the law of the case doctrine

does not render the Order Granting Summary Judgment moot.

Pursuant to the law of the case doctrine, "a

determination of a question of law made by an appellate court

. . . may not be disputed by a reopening of the question at a

later stage of [the] litigation." Hussey v. Say, 139 Hawai‘i

181, 186, 384 P.3d 1282, 1287 (2016) (quoting Tabieros v. Clark

Equip. Co., 85 Hawaiʻi 336, 352 n.8, 944 P.2d 1279, 1295 n.8

(1997)).

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Here, the issue of whether the Schmidts' HUFTA claim

remained viable once the 2004 Judgment expired was not

previously addressed, and the Hawai‘i Supreme Court specifically

declined to address this issue in the third appeal. Schmidt,

145 Hawai‘i at 360, 452 P.3d at 357.

Thus, contrary to the Schmidts' argument, the law of

the case doctrine did not render the Order Granting Summary

Judgment moot.

Based on the foregoing, we affirm the November 12,

2020 Order Granting Summary Judgment and November 12, 2020 Order

Denying Motion to Amend.

DATED: Honolulu, Hawai‘i, September 25, 2024.

On the briefs: /s/ Keith K. Hiraoka
Presiding Judge
R. Steven Geshell,
for Plaintiffs-Appellants. /s/ Clyde J. Wadsworth
Associate Judge
Paul Alston,
Madisson L. Heinze, /s/ Sonja M.P. McCullen
(Dentons), Associate Judge
for Defendants-Appellees.

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